Economists fear fall in investment, aid

CAMBODIA risks a slowdown of foreign direct investment and a dropoff in official development aid (ODA) as the impact of the global financial crisis spreads to developing countries, economists say.

"FDI could slow quite considerably with the financial meltdown ... not a reversal necessarily of capital, but a slowdown in the inflow of capital," said Eric Sidgwick, senior country economist for the Asian Development Bank (ADB).

This year, FDI inflows amounted to some US$900 million. The amount of ODA pledged to the Kingdom was $690 million.

"We don't know if rich countries will cut ODA yet," Minister of Commerce Cham Prasidh told the Post, adding that the government was anticipating that donors would soon become less inclined to cough up assistance for the Kingdom.

However, Nguon Meng Tech, director general of the Cambodia Chamber of Commerce, said, "People should not worry too much about foreign aid."

"Donor nations already have prepared their budgets for this year and will not change them now," he said, adding that he thought the private sector had also secured sufficient investment to weather the crisis.

But key business figures say economic turmoil overseas is already having a significant impact on FDI.

"Hundreds of my workers are losing their jobs ... if this continues, the impact on my business will be serious," Mong Reththy, president of Mong Reththy Group, told the Post.

He added that his company recently lost $1 million when the price of palm oil dropped from $1,200 to $500 per tonne.

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